Note: EPA no longer updates this information, but it may be useful for historical purposes. See http://www.epa.gov/airquality/powerplanttoxics/ for information about standards to limit mercury, acid gases and other toxic pollution from power plants.

Action

On February 24, 2004, the Environmental Protection Agency (EPA) proposed
a rule supplementing its December 15, 2003 proposal to permanently
cap and reduce mercury emissions from power plants.

Today's supplemental proposal includes:

Model cap-and-trade program -- a program jointly administered by participating states and the EPA to
cost effectively reduce mercury emissions from power plants. In this supplement, EPA is proposing rule
language for a cap-and-trade program that states can adopt to achieve and maintain a mercury emissions
budget consistent with the rule signed on December 15. States may join the trading program by adopting
or referencing the model trading rule in State regulations or adopting regulations that mirror the
necessary components of the model trading rule. Today's supplemental proposal identifies the necessary
common components of state rules and identifies EPA and state responsibilities for administering a
mercury trading program. Today's notice also discusses the program elements of the model trading
program, including applicability, allowance allocations, banking, compliance, and enforcement.

Monitoring and reporting requirements -- methods to measure mercury emissions from new and
existing coal-fired electric utility steam generating units. In today's rule, EPA proposes requirements
for monitoring mercury emissions from utilities in states choosing to participate in the trading program.

EPA will take comment on this proposal for 45 days after publication
in the Federal Register.

Background

Mercury is a toxic, persistent pollutant that accumulates in the food
chain. Fossil fuel fired power plants are the largest source of human-generated
mercury emissions in the United States.

Concentrations of mercury in the air are usually low and of little direct
concern. However, atmospheric mercury falls to Earth through rain
or snow and enters lakes, rivers
and estuaries. Once there, it can transform to its most toxic form,
methylmercury, and accumulate in fish tissues.

Americans are exposed to mercury primarily by eating contaminated fish.
Because the developing fetus is the most sensitive to the toxic effects
of methylmercury, women of childbearing age are regarded as the population
of greatest concern. Children who are exposed to low concentrations of
methylmercury prenatally are at increased risk of poor performance on neurobehavioral
tasks, such as those measuring attention, fine motor function, language
skills, visual-spatial abilities, and verbal memory.

Because many types of fish are caught and sold globally and mercury can
be transported thousands of miles in the atmosphere, effective control
of exposure will require reductions in global emissions. Recent estimates,
which are highly uncertain, of annual total global mercury emissions from
all sources, natural and anthropogenic (human-generated), are about 5,000
to 5,500 tons per year. U.S. anthropogenic mercury emissions are estimated
to account for roughly 3 percent of the global total, and U.S. power sector
are estimated to account for about 1 percent the total global emissions.

The U.S. has reduced its anthropogenic mercury emissions by more than
40 percent since 1990. This is important because EPA estimates that about
half of the mercury deposited in the U.S. comes from U.S. sources including
coal-fired power plants.

On December 15, 2003 rule, EPA proposed three alternatives
for controlling emissions of mercury from utilities. The alternatives
include:

Proposed rule requiring utilities to install controls known as “maximum
achievable control technologies” (MACT) under section 112 of the
Clean Air Act. If implemented, this alternative would reduce nationwide
emissions of mercury by 14 tons (29 percent) by the end of 2007, from
48 tons to 34 tons annually.

As part of this rulemaking, EPA has requested comment on an alternative
mercury cap-and-trade program [under Clean Air Act section 112(n)]. This
would be a federally run program. The trading program requirements would
be similar to the section 111 program described below.

Proposed rule establishing “standards of performance” limiting
mercury emissions from new and existing utilities. This proposal,
under section 111 of the Clean Air Act, would create a market-based
cap-and-trade program that, if implemented, would reduce nationwide
utility emissions
of mercury in two distinct phases. When fully implemented, mercury
emissions
would be reduced 33 tons (69 percent), from 48 tons to 15 tons
annually. Under this alternative, states would submit a plan to
EPA for running a
trading program. With EPA's approval of their plan, the states
would allocate allowances to sources and states and EPA would share
responsibility for
administering the program.

EPA also proposed to revise its December 2000 finding that
it is Aappropriate and necessary@ to regulate utility hazardous
air emissions using the MACT standards provisions (section
112) of the Clean Air Act. This action would give EPA the flexibility
to consider a more cost effective way to control mercury emissions.

In a separate but closely related action known as the AInterstate
Air Quality Rule,@ EPA proposed a regulation to improve air quality
in the Eastern United States. This proposal would address interstate
air pollution by requiring states to reduce sulfur dioxide (SO2)
and nitrogen oxides (NOx) emissions. States could comply with these
requirements through a cap and trade system based on the successful
Acid Rain Trading Program. Technologies to reduce SO2 and NOx under
the “Interstate Air Quality Rule” would also concurrently
reduce mercury.

The health benefits of addressing mercury, SO2, and NOx
in an integrated fashion are dramatic. EPA expects this suite
of actions to reduce the number of asthma attacks and heart
attacks around the country by lowering the levels of fine particles
and ground-level ozone in the air. By reducing mercury levels,
this program would also reduce risks for pregnant women and
young children who consume certain fish from local streams
and lakes.

Cap-and-Trade Basics

Under the cap-and-trade approach proposed in the December
15, 2003, rulemaking, EPA would allocate to each state specified
amounts of emission Aallowances@ for mercury, which essentially
caps mercury emissions. The states would allocate those allowances
to utilities. A utility must hold sufficient allowances to
cover its emissions each year, so the limited number of allowances
ensures that the required reductions are achieved. Utilities
may sell or bank their excess emission allowances, providing
them with a strong incentive to reduce mercury emissions.

The mandatory emissions caps, coupled with significant
automatic penalties for noncompliance, would ensure that human
health and environmental goals would be achieved and sustained.
At the same time, stringent emissions monitoring and reporting
requirements make flexibility possible. The flexibility of
allowance trading creates financial incentives for utilities
to look for new and low-cost ways to reduce emissions and improve
the effectiveness of pollution control equipment.

In 2018, the second phase of the mercury program sets a cap of 15
tons. The program includes a banking provision that results in both
early reductions (benefiting health and the environment) and a later
date when the cap will be achieved.